Blue Star Negotiation Strategy - a Framework

"In business as In life - you don’t get what you deserve, you get what you negotiate.” Chester Karras1

Negotiations can win a sale, a promotion; can have an impact of millions (saving a factory from closure, enterprise transactions) to hundreds of millions (infrastructure projects, a JV, merger or acquisition). These types of negotiations are usually, albeit not always, carefully prepared. Nevertheless, corporations often do not have a best practices process or resource center to sharpen the institutional memory on negotiations.2

The modern "received wisdom" is to strive for "win/win," - lean partnering and sharing of benefits. When this approach is taken, the lack of "learning from precedent" has led to three frequent fundamental negotiation errors, above all in supply chain management.

The first is that the contractual form typically still reflects the traditional adversarial allocation of risk, i.e. to allocate as much risk as possible to the other party. These kinds of contracts, based on time-honored precedent, may well create more problems in an attempted "win/win" than they prevent - both during and after the negotiation.

The second error arises because the new partnership relationships call for the sharing of benefits. However the sharing (sometimes "equal sharing") does not properly reflect either the distribution of risk among the parties, nor the different degrees of contribution to the new benefits.

The third is that the negotiations do not allow adequate scope for the shifts in power associated with the business cycle. For instance, in a recession the smaller partner´s very survival hung on its sole supplier status with a major firm. A technological shift and economic boom have opened new opportunities for the innovative supplier, now turbocharged and accelerating. The "lifeline" to the major corporation has become a "ball and chain."

The negotiations to craft a new strategy may have even more pitfalls. Internal negotiations need to be carefully orchestrated to create "buy-in" for a shift in strategy. H. Igor Ansoff (referred to by Henry Mintzberg as "the father of strategic management") aptly remarked: "A natural organizational reaction is to fight against the disruption of the historical cultural and power structure, rather than to confront the changes posed by the enviroment."3

The placard below serves as a reminder of the key steps for an important negotiation, whether internal or external.

The Seven Step Strategy, a Placard

1)Prepare -understand their position, concerns and options

2)Listen - attentively

3)Ask many questions - patiently

4)Cautiously deliberate before making any first move or offer

5)Allocate concessions by measured trading (not unilaterally)

6)Risk & Reality check- on satisfaction (for all parties)

7)Doable deal, or Decisively walk away (to a considered alternative)

This treatment of Negotiating Strategy has two sections. The first is a brief overview, emphasizing the point that negotiating is a learned skill, but hardly one learned by reading alone. The second section introduces a Strategic Negotiating Framework. The full presentation, which includes an annotation of the seven step strategy above, is made on its own subpage.

I. OVERVIEW

Michael Wheeler has written a good eleven page article “Negotiation Advice: A Synopsis”, a Harvard Business School Case, June 2009, which may be ordered at Havard Business Publishing for ca. $7.00. The article begins with a summary of research conducted by Rob Walker and published as “Take It or Leave It: The Only Guide to Negotiating You Will Ever Need,” in Inc. magazine, August 2003. In reviewing the literature, Rob Walker noted two common denominators to negotiating books. They all emphasized (1) preparation and (2) listening.

"Give me six hours to cut down a tree, and I will spend the first four sharpening the axe." Abraham Lincoln (1809-1865)

Walker also noted that negotiation competence was not derived from a dominating, charismatic personality or a large bag of tricks. What successful negotiators did have in common was “high self-esteem” and “utter clarity.” Negotiation requires preparation, imagination and patience. Integrity and a sense of humor do not hurt either. These skills and traits can hardly be acquired just by reading some books, however excellent they may be.

Walker’s skepticism about the value of reading alone is confirmed by a study cited towards the end of “Negotiation Advice: A Synopsis.” Janice Nalder, Leigh Thompson and Leaf von Boven published their research in “Learning Negotiation Skills: Four Models of Knowledge Creation and Transfer,” Management Science, April 2003.

Four groups were divided as follows:

1) Read about the theory and practice of win/win

2) Conducted a simulation

3) Reviewed win/win scenarios

4) Observed win/win negotiations

The group that then performed the worst, i.e. had learned the least, was the first one.Clearly, reading alone does not suffice, any more than one can learn acting, singing or public speaking merely by reading about it. This point reinforces the importance of preparing with realistic role-plays of different scenarios.

That notwithstanding, most professional negotiators are familiar with two standard works. The first is Getting to Yes: Negotiating Agreement Without Giving In, by Roger Fisher, William Ury and Bruce Patton, 2nd ed. (revised from the 1981 original) Penguin Books, 1991, with more than five million copies in print in 35 languages.(The German version is known as Das Harvard Konzept.)

The authors introduced the now standard acronym BATNA: Best Alternative To a Negotiated Agreement. Their method, as explained in Chapters 2 through 5 of the book, is based on the following principles:

- Separate the people from the problem.

- Focus on interests not positions.

- Invent options for mutual gain.

- Insist on using objective criteria.

The second standard work is by Chester Karras, with the interesting “quotation title” at the top of the page with which these comments on negotiation strategy open. Nevertheless Chester Karras, whose landmark book is based on his doctoral thesis supported by decades of corporate negotiating experience, is not cited and does not even appear as one of the 25 authors listed in the bibliography of the Michael Wheeler´s "Negotiation Advice, a Synopsis"!

II. A STRATEGIC NEGOTIATING FRAMEWORK

The framework, with the five mnemonic acronyms SPAN, SPADA, KFS, ASAP and SNAFU, is presented in Tools & Techniques.It is intended to remind one of important issues, to give structure to one’s deliberations, and to help in asking questions, generating scenarios and practicing role-plays. Proper use of this framework, in conjunction with that of selected resources (at “Negotiation Resources” at “Papers”), can make all the difference in the outcome of a negotiation – with a substantial impact on the bottom line (of the corporation, of your career).

But at the risk of repetition, you have to use selected parts as appropriate, working through them, practicing them live and not just read the entire framework!

The framework consists of four main sections:

I. Planning, the most neglected phase

- SPAN

- SPADA

- CCC

- KFS

- ASAP

II. Win-Lose strategy and tactics

- Scenarios

- BATNA

- Power Plays

III. Win/Win strategy and tactics

- Risks

- Creative Structuring

IV. Follow-up, the second most neglected phase

- closing the deal versus the on-going business

- conflict resolution

... SNAFU

... Mediation

...Arbitration

... Litigation

GLOSSARY

1 This sentence is the title of a book by Chester L. Karras, which is often referred to as "the bible of negotiation".See the negotiation bibliography for details.

2 The corporation as a learning corporation in terms of technological innovation is well established. However that is not the case in terms of negotiating expertise. Certainly managers may periodically attend negotiation seminars. However what is learned in a brief, intensive seminar is subject to an even faster (exponential) rate of decay than what was learned in a full semester university course. (A negotiating course is required of MBA students at Harvard Business School.) Without reinforcement, the cumulative benefit of sporadic training is minimal.